Greenpeace activists hold banners reading 'No more lies' as they stand on top of Volkswagen cars in front of VW's 'Sandkamp' gate in Wolfsburg, Germany, last week. The Volkswagen emissions scandal has rocked Germany's business and political establishment and analysts warn the crisis at the car maker could develop into the biggest threat to Europe's largest economy.

Cologne, Germany — It’s the first day of class at the University of Applied Sciences, or TH Köln. Students line up at information desks and scour bulletin boards to find out where their lectures in mechanical and civil engineering will be held.

But even amid the excitement, a cloud hangs over them.

The headquarters of Volkswagen might sit 230 miles away from this campus, along the Rhine in the heart of Germany’s industrial belt, but the news that the iconic company knowingly installed software in at least 11 million cars to cheat on emissions testing has hit close to home, coloring moods here as it has in every classroom, office, and dinner table in Germany.

The scandal cuts deeper than just run-of-the-mill corporate fraud. Volkswagen, the closest thing Germany has to a national icon, lied. It cheated. It polluted – breaking the standards of reliability and environment implicit in a German label. And now it has shaken German conceptions of who is trustworthy – and what Germany stands for, at a time when its leadership of Europe amid immigration and financial crises has put it under enormous pressure.

“What is the reputation of a German engineer? He is honest, precise, and straightforward. A yes is a yes, and a no is a no,” says Michael Silverberg, a professor of engineering at the university. “I feel that I myself am reflecting this [scandal], even though I’m not guilty.”

Holger Geissler, a board member of the polling firm YouGov Germany in Cologne and editor of the new book “What Makes Germans Tick,” notes that Volkswagen is part of the German identity, giving the scandal an almost existential nature. “We see ourselves as very reliable people, very trustworthy, and hardworking," he says. "It does not fit our image to be dishonest.”

'Such a shock'

In a YouGov poll released this summer, Germans chose Volkswagen as the national icon they most identify with, with 63 percent voting for it – far ahead of Bach, Goethe, and even Chancellor Angela Merkel. The company is so woven into the fabric of society that it’s incorporated into the lexicon, with “Generation Golf” (as in Volkswagen's Golf model) used to describe the generation born in the 1970s, in the same way that Generation X is employed in the United States.

The Volkswagen, with its motto “Das Auto,” or “The Car,” is not just omnipresent on German roadways, but is a metaphor for modern Germany, says Clemens Bomsdorf, a German journalist who covers business and culture for German and English language publications. The first model was conceived by Adolf Hitler as a car for the masses. But the production of the Beetle after World War II soon became a symbol of Germany’s postwar boom. “Volkswagen does not have this shiny history," he says. "But it faced its history, just as Germany did, and overcame it.”

The company and Germany rose in tandem with unparalleled reputations for propriety and precision. Germany ranked No. 1, for example, in the 2014 Anholt-GfK Nation Brands Index, which measures the image of 50 countries.

“It is regarded as the quintessentially civilized nation. That is why this is such a shock,” says Simon Anholt, the publisher of the “Good Country Index.” In another country, such a scandal may have led to a collective shrug, “confirming everything they always thought,” he says.

The German response is more “brittle,” he says. They can’t as easily “absorb the shock.”

Indeed, many fear that Germany’s moral leadership, from the Greek crisis, where it has insisted on following the rules, to the environment, could be undermined, says Mathis Herzke, a business student at TH Köln. “Volkswagen showed no respect for the political impact,” he says. “During the Greek crisis, everyone saw Germany as only wanting to make money. Now this scandal confirms that picture of us.”

In an April poll by Pew Research Center on TTIP, a US-European Union trade deal currently under negotiation, only 2 percent of Germans said they trust American environmental standards. A whopping 96 percent, however, said they trust EU standards. But Volkswagen has turned that data point on its head. Or as Mr. Herzke puts it: “We are just as bad as the Americans.”

For some, the damage is even worse. German engineers played to their strength, says Mr. Bomsdorf, “using good things to do bad things,” he says. “It is a perversion of the art of German engineering.”

Rebuilding trust

For all of those who feel shaken by the Volkswagen scandal, however, there are many others who feel optimistic, that German strengths will be used not for bad intent but to overcome the damage done – and that Germany might come out even stronger.

Here in Cologne, engineering feats are part of the city’s storied history. The Cologne region has long been an important center for the motor industry, with 23 companies and more than 27,000 employees, according to city figures. Ford Werke GmbH is located here, along with the German headquarters of vehicle manufacturers including Volvo, Mazda, and Citroen.

Many consider the city the birthplace of the automobile industry. It was here that Nicolaus August Otto, a 19th century salesman and visionary, created the world’s first engine works, today called Deutz, and crucially the first high-compression, four-stroke engine in 1876. Today the “Otto cycle” is the principle behind every motorized engine in the world. Today, a walk through the Deutz museum, located next to its engine factory, presents an homage to German engineering geniuses including Gottlieb Daimler, Robert Bosch, and Karl Benz.

A VW logo is reflected in a puddle at the Volkswagen headquarters in Wolfsburg, northern Germany.Julian Stratenschulte/dpa/AP

Karl Heinz Breuer, the museum guide and former engineer who worked at Deutz from 1966 until he retired last year, expresses the optimism in the staying power of German engineering.

“Germans care about durability and reliability,” he says. “This comes from our mentality or philosophy.” That mentality has grown only stronger upon years of know-how, Mr. Breuer says, and the VW scandal will not undermine that.

“I fully believe this is not typical for Germany or for German products,” he says.

Outside the Deutz complex, Jan Derckum echoes that view. He owns a Volkswagen, like roughly half the people interviewed for this story. “Germany is probably the [foremost] nation in the world that cares about the environment,” he says. “This is just a drop in bucket.”

He also, like many others interviewed, believes attempts to cheat environmental regulations are far from exclusive to Volkswagen and Germany, and that if any country is poised to regroup, it is Germany. “We have the best car engineers in the world, and they will solve this problem.”

Rebecca Harms, a deputy for the Greens in the European Parliament from Lower Saxony, where Volkswagen is headquartered, says that the scandal has had a dramatic impact on her state. But it hasn’t cost Germany its leadership, especially on the environment. If anything, she argues, it shows how much people care about being green and could lead to better enforcement at the European level.

“Hopefully this huge manipulation scandal, which I see really as criminal, gives us the chance to improve European regulation,” she says.

'Why should I be ashamed?'

This is not the only incident that is currently sparking introspection in German society.

Last spring, when a Germanwings pilot intentionally crashed his plane into the Alps, it led some to question flaws in airline screening processes. As the refugee crisis exploded, Germans, who at the outset were optimistic about their ability to absorb up to a million refugees, had to back down from their unconditional embrace. On a more quotidian front, a certain failure of German precision – the country's outdated infrastructure that causes mind-numbing traffic jams and delays – has rankled the public for years.

But this scandal is different because of the importance of the Volkswagen. Mr. Anholt calls cars “ambassadors” around the world, and in the case of German brands, they reflect the traits that Germans most prize, like trustworthiness.

Still, reaction may reflect something of a generational divide.

Mr. Silverberg, the engineering professor, is 57, and grew up in the postwar era along with Volkswagen. That might explain why he takes this scandal so personally. Jenny Michalski, on the other hand, a 19-year-old student of social work who drives a Škoda, a Czech auto brand bought by VW in 2000, doesn’t feel as burdened.

“Why should I be ashamed?” she asks. “It is Volkswagen that should be ashamed.”

While traditionally owning a car used to be the ultimate status symbol, German youths care far less about cars today, says Stefan Bratzel, founder of the Center of Automotive Management, a think tank near Cologne. In one recent study, young people said they cared more about mobility generally – public transport, shared cars, traveling – than owning a vehicle. “For them it is more important what Apple is doing than what VW is doing,” Mr. Bratzel says.

Regardless, all Germans can unite in one basic sentiment, put simply by Ferdinand Dudenhöffer, director of the Center for Automotive Research at the University of Duisburg-Essen: “We don’t want to be a country that is cheating against the laws.”

And Germany today finds itself in an uncomfortable and unfamiliar position: No one knows how far the scandal will go or how it will end. “The real problem,” says Silverberg, is that “the consequences are not clear.”